Generic Strategies

1
Generic Strategies - Export one standardized
product to all markets (e.g. Japan TVS,
Walkmans, hi-fis) (Model T strategy) -
Introduce product to home market, then begin to
export as home market matures ( many U.S.
products) (( But note how this fuels criticism
of LDCs of dumping obsolete technology onto them
)) - Customize product for each export market
(typical of many European exporters)
2
Exporting
STEP - Social Technological Economic Po
litical factors Competitive/comparative
advantage conditioned by foreign exchange rate
- level - volatility conditioned by demand
conditions abroad SEGMENT THE MARKET
Product quality Product Features
Price What mix will best fit a particular
market?
3
Possible segmenting factors - Geographically
homogenous or regionally diverse? - Income But
note that segmenting by average GDP per capita
leaves out - high income individuals in
countries with skewed distributions -
emerging middle class in India, China, etc. -
Demography - age distribution -birth rate/
family formation -language -religion/culture -
urban/rural - Consumer tastes quality colour s
tyle
4
Segment by Use The same product may be used in
quit different ways e.g. Fertilizer Ammonium
nitrate is very good, very common fertilizer,
widely used in agriculture in Manitoba and
throughout the world. Ammonium nitrate is also
used in the mining industry. Mix it with diesel
oil and you have a much safer, much cheaper
explosive than dynamite, but just as effective.
This was what Timothy McVeigh used to blow up
the Federal Building in Oklahoma City, and has
become a favourite with terrorists around the
world.
5
Modify product to suit conditions -consumers
preferences - patterns of use - physical
conditions - humidity -temperature -
dust e.g automobiles - desert radiators, oil
radiator, air cleaner - a/c
6
Industrial Products Segment by level of
sophistication - availability of skilled labour
- operation - maintenance Note that in
developing countries with high growth rates,
level of investment in infrastructure is higher
than average electric power airports harbours
roads water sewer telecommunications
7
Segment industrial products by natural resource
base - agriculture - what kind of crops?
Livestock? - mining - Shallow? Deep? Strip?
Hard rock? Fluvial? Marine? - forestry
Hardwood? Softwood? Plantation? - timber -
pulp and paper - fishery pelagic,
riverine/fresh water? Species? Seasonal? Note
that LDCs are dual economies - traditional
sector ) - modern sector ) co-exist
(Process of development can be thought of as
moving social structure and activity from the
traditional sector to the modern sector. )
8
Differences between consumer markets and
industrial markets Consumer product use, eat,
wear - no skill required to use it Industrial
product - operate and maintain it to produce
something else - skill required to do this -
often the skill itself is an exportable commodity
- service contracts for aircraft maintenance,
IT functions - BOT contracts to introduce new
technology (build, operate, transfer) Note too
the role of management skills/style/sophisticatio
n in industrial markets - influence choice of
technology, - labour intensive vs. capital
intensive methods
9
Costs of exporting - transportation -
distribution - commissions - tariffs will
likely force you into a higher price segment than
in your home market ( unless you are dumping
surplus output) Question Is there enough demand
at that price to make it pay?
10
Things to Consider 1.Whats happening in
similar countries - what trends in what
direction? 2. What are prospects for
deregulation/restructuring of markets? 3. What
are host government policies and programme? -
supportive of industrial markets? - restrictive
for consumers? - favour local mfrs? - favour
local distributors? - cultural issues? 4. What
is the position of potential competitors? -
potential capacity constraints? - high market
growth makes it easier to get a share
11
OK - we have a market segment with potential we
have a competitive advantage to get in Question
How? What entry strategy? Answer The 4 Ps
! Remember that the product will likely have to
be specialized in some degree Try to keep price
competitive Pay particular attention to
distribution - channels as well as well as
physical distribution Remember that after sales
service is an important part of promotion and is
particularly critical to importers because they
can easily feel isolated
12
Channels of Distribution - will likely be more
multi-layered and complex than domestic
distribution - may have to use different kinds
or types of channels than for domestic market In
developing countries there is often a limited
choice of possible agents It is vital to choose
the right one - youll likely be stuck with him
for several years! - Can be difficult to change
agents Note the importance of the channel of
distribution as the channel for the reverse flow
of information - that is your source of
information about the market. Key issues -
Ownership of the goods at various stages of
distribution - Control of the channel of
distribution
13
Generic Strategies - Export one standardized
product to all markets (e.g. Japan TVS,
Walkmans, hi-fis) (Model T strategy) -
Introduce product to home market, then begin to
export as home market matures ( many U.S.
products) (( But note how this fuels criticism
of LDCs of dumping obsolete technology onto them
)) - Customize product for each export market
(typical of many European exporters)
14
Factors that impede trade 1. Natural factors -
transport - distribution costs - promotion
costs ( ads from home country will NOT work
translation is not good enough) - cultural
factors - language - social values -
political system - traditional (local ) way
of doing business 2. Government imposed
factors - quotas - financial
restrictions - localization policies -
tariffs
15
Concept of psychological distance Enter first
those markets which seem most similar to our home
market in terms of - language - cultural
similarity similar management
styles Experience breeds comfort! Ok weve
handled that, we can now handle something a
little more complex
16
Advantages of a good agent 1. Knows the
market 2. Has access to channels of
distribution 3. Has knowledge of, and contacts
in, government 4. May have knowledge of
operations in one or more foreign markets 5. May
have knowledge of production capabilities in one
or more products 6. May be able to supply some
capital.
17
Countertrade - various devices and techniques to
get around payment or currency problems, or as
an instrument to force local investment and
economic development 1. Barter 2. Counter
purchase or re-investment - often significant in
the purchase of military equipment 3. Contract
to purchase part or all of output 4. Production
sharing - e.g in mining or petroleum production-
take payment by receiving a share of physical
output - assume risk of price volatility in
commodity markets 5. Industrial offset -
requirement for some portion of final product to
be produced or assembled locally 6. Switching -
like the above - but involves balancing benefits
over three or more countries 7. Unblocking funds
for approved purposes - gives government control
over use of foreign exchange